Chartwell Seniors Housing REIT
TSX : CSH.UN

Chartwell Seniors Housing REIT

March 29, 2007 16:11 ET

Chartwell Announces Acquisition of Major US Retirement Portfolio for Cdn $400 Million And Update to Its Acquisition of Horizon Bay Management

Acquisition Grows U.S. Interests to 35% of Total Portfolio

MISSISSAUGA, ONTARIO--(CCNMatthews - March 29, 2007) -

PRESS RELEASE NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES

Chartwell Seniors Housing Real Estate Investment Trust (TSX:CSH.UN) announced today that it would be acquiring a 100% interest in a high quality portfolio of twenty-four freehold and two leasehold interests in retirement communities aggregating 2,374 suites located in strong markets throughout the southern United States.

The total cost of the transaction will be approximately Cdn $400 million, before closing and mortgage defeasance costs, which will be partially financed with approximately Cdn $270 million of mortgage financing with an average term of 10 years at an average interest rate of approximately 5.75%. Closing of this acquisition is expected on April 30, 2007 and is subject only to normal closing conditions.

Also today, Chartwell announced that it had arranged with a syndicate of underwriters led by RBC Capital Markets Inc. a Cdn $275 million issuance of trust units and convertible debentures on a bought deal basis. This financing is expected to be completed on April 20, 2007.

The properties are being acquired from Merrill Gardens L.L.C., one of the most respected names in seniors housing in North America. The majority of the facilities were built within the last ten years, and they are modern, attractive and incorporate the latest services and innovations in seniors care. With the exception of one facility, all are licensed residences and are almost exclusively private pay. Approximately 70% of the resident profile is Independent Living, allowing for residents to age in place through the provision of additional services as required.

The seniors communities being acquired are well-situated in high demand markets, such as Texas and Florida, and have experienced very strong and stable occupancies in excess of 95% over the last five years. Existing staff at the residences will remain in place, while the overall portfolio, except those properties located in Alabama, will be managed by Horizon Bay Chartwell, Chartwell's joint venture property management entity in the US market.

"We are extremely pleased to be acquiring this well-positioned and high quality portfolio," commented Stephen Suske, Vice Chair and Co-CEO. "Like Chartwell, Merrill Gardens' strong reputation has been built on delivering superior care and service to residents. Their vision and operating culture mirrors the values adopted by everyone at Chartwell, and we look forward to continuing this tradition of excellence going forward."

"The transaction brings a number of significant benefits to our Unitholders," Mr. Suske continued. "The acquisition strengthens our US platform with a solid presence in several major markets in the United States. With this acquisition, our US properties will grow to a total of 13,009 suites in 79 facilities, in 16 states and will comprise 35% of our total North American portfolio. With our recently increased ownership position in Horizon Bay Chartwell to an effective 74.5% interest, we will receive a larger stream of sustainable fee revenues from the properties, while the increased concentration in regions where we already own properties, will generate enhanced economies of scale, increased purchasing power and operating synergies."

"We are also pleased to be entering into a new business relationship with the proven, highly successful and reputable management team at Merrill Gardens, and look forward to working with them on potential transactions in the future," added Robert Ezer, President and Co-CEO. "This acquisition with the other acquisitions announced year-to-date are expected to add approximately $0.03 per unit in FFO in 2007, increasing in 2008 after the integration of the Merrill properties is complete."



Details of the portfolio being acquired are as follows:

Owned Properties - 24
---------------------------------------------------------------------------
Facility Location IL RH AL Total Occupancy Year
Name Suites Suites Suites Suites (as of 3/16/07) Built
---------------------------------------------------------------------------
Merrill
Gardens
at Albertville,
Albertville AL 30 16 21 67 97% 1999
Merrill
Gardens
at Florence Florence, AL 38 21 10 69 99% 1999
Merrill
Gardens at
Northport Northport, AL 44 24 10 78 90% 1999
Merrill
Gardens
at Apache Apache
Junction Junction, AZ 80 43 0 123 89% 1999
Merrill
Gardens
at Chandler Chandler, AZ 57 31 0 88 97% 1999
Merrill
Gardens at
Altamonte Altamonte
Springs Springs, FL 62 33 0 95 100% 1999
Merrill
Gardens
at Lutz Lutz, FL 55 30 0 85 100% 2000
Merrill
Gardens
at Orange Orange
City City, FL 55 29 0 84 92% 1997
Merrill
Gardens
at Port St. Port St.
Lucie Lucie, FL 49 27 6 82 100% 1999
Merrill
Gardens
at Sarasota Sarasota, FL 95 51 0 146 85% 1994
Merrill
Gardens
at Tamarac Tamarac, FL 62 33 0 95 95% 2000
Merrill
Gardens
at Vero Vero
Beach Beach, FL 68 36 0 104 100% 2001
Merrill
Gardens at Carrollton,
Carrollton GA 45 24 0 69 100% 1999
Merrill
Gardens
at Rome Rome, GA 45 24 0 69 100% 1999
Merrill
Gardens
at Bossier Bossier
City City, LA 47 26 11 84 96% 1999
Merrill
Gardens
at Ten Oaks Lawton, OK 53 28 19 100 90% 1989
Merrill
Gardens
at The
Parkview Memphis, TN 83 45 0 128 94% 1924
Merrill
Gardens
at Graham Graham, TX 37 20 11 68 100% 1984
Merrill
Gardens
at Grand Grand
Prairie Prairie, TX 55 30 0 85 100% 1997
Merrill
Gardens
at N.
Richland N. Richland
Hills Hills, TX 68 37 0 105 86% 1998
Merrill
Gardens
at Round
Rock Austin, TX 37 20 11 68 99% 1999
Merrill
Gardens
at San San Antonio,
Antonio TX 59 31 22 112 96% 1997
Merrill
Gardens
at San
Marcos San Marcos, TX 37 20 11 68 100% 1998
Merrill
Gardens
at Wichita Wichita
Falls Falls, TX 45 24 0 69 100% 1997
---------------------------------------------------------------------------
Totals 1,306 703 132 2,141 95%
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Leased Properties - 2
---------------------------------------------------------------------------
Facility Location IL RH AL Total Occupancy
Name Suites Suites Suites Suites (as of 3/16/07)
---------------------------------------------------------------------------
Merrill
Gardens at Clearwater,
Clearwater FL 50 27 19 96 98% 2000
Merrill
Gardens
at Lake Altamonte
Orienta Springs, FL 75 41 21 137 100% 2000
---------------------------------------------------------------------------
Totals 125 68 40 233 99%
---------------------------------------------------------------------------
Grand
Totals - 26 1,431 771 172 2,374 95%
---------------------------------------------------------------------------


With the completion of this transaction, and others announced subsequent to
the 2006 year-end, Chartwell's portfolio will continue to be well balanced
geographically and by level of care:

--------------------------------------------------------------
--------------------------------------------------------------
Portfolio by Geography Owned or Percentage
Managed Suites
--------------------------------------------------------------
Ontario (GTA) 4,960 13%
Ontario (West) 3,903 10%
Ontario (East) 1,964 5%
Ontario (North) 1,834 5%
Total Ontario 12,661 33%
Quebec 8,201 22%
Atlantic Canada 104 -
British Columbia 2,894 8%
Alberta 773 2%
Saskatchewan 157 -
Total Canada 24,790 65%
United States 13,009 35%
--------------------------------------------------------------
Total Portfolio 37,799 100%
--------------------------------------------------------------
--------------------------------------------------------------

--------------------------------------------------------------
--------------------------------------------------------------
Portfolio by Level of Care Owned or Percentage
Managed Suites
--------------------------------------------------------------
Independent Living 19,528 52%
Light Care Retirement Home 6,430 17%
Full Care Retirement Home 3,793 10%
Assisted Living 2,270 6%
Long Term Care 5,778 15%
--------------------------------------------------------------
Total Portfolio 37,799 100%
--------------------------------------------------------------
--------------------------------------------------------------

--------------------------------------------------------------
--------------------------------------------------------------
Total Portfolio Suites Percentage
--------------------------------------------------------------
Canada:
Owned beds / suites 15,472 41%
Managed beds / suites 2,715 7%
Beds / suites in development or 6,603 17%
lease up
Total 24,790 65%
United States
Owned beds / suites 7,036 19%
Managed and leased beds / suites 5,973 16%
Total 13,009 35%
--------------------------------------------------------------
Total Portfolio 37,799 100%
--------------------------------------------------------------
--------------------------------------------------------------


Chartwell was advised on this acquisition by Mel Gamzon, President, Senior Housing Investment Advisors, based in Fort Lauderdale, Florida.

Additional information on this acquisition can be obtained in the Investor Relations section of Chartwell's web site at www.chartwellreit.ca under the Merrill Gardens tab.

Horizon Bay Acquisition Update

As previously announced on January 1, 2007, Chartwell acquired a 49% interest in Horizon Bay Management ("HBM"), a leading US seniors' housing management company. Through this interest, Chartwell acquired a leasehold interest in 26 properties and an interest in management contracts pertaining to HBM's management of these 26 leased properties, which includes 5,740 mainly independent and assisted living suites under management (80% IL and 20% private pay AL).

The operating lease payments that HBM is contractually obligated to make with respect to these 26 leasehold properties escalate at a rate of approximately 3.35% per annum over the 12.4 year weighted average term of the respective leases. Chartwell anticipates that the revenue growth from these leased interests will be in excess of the contractual lease payment increases of approximately 3.35% per annum.

Canadian GAAP requires that Chartwell records a monthly lease expense at an amount equal to the average monthly lease payment, which it is contractually obligated to pay over the term of the leases ("Straight-line Basis"). Recording operating lease expenses on a Straight-line Basis will result in an expense which is greater than the lease payments actually being paid in the first six years of the term of the leases. For the final 6.4 years of the leases, this will result in an expense which is less than the lease payment actually being paid. Therefore, net income as reported in Chartwell's financial statements and its funds from operations ("FFO"), as defined by REALpac and which is based on GAAP net income, will also be less during these first six years than would have resulted had the leases not been accounted for on a Straight-line Basis. It is estimated that the Straight-line Basis accounting treatment will result in a reduction to Chartwell's 2007 FFO per unit of approximately $0.08 -0.10 per Unit (based on the fully diluted number of units outstanding after the announced issue).

Chartwell's cash flow from operations as recorded in its consolidated financial statements, and its adjusted funds from operations ("AFFO") (which is based on cash flow), will not be affected by recording operating lease expenses on a Straight-line Basis.

The REIT industry has been moving away from reporting distributable income ("DI") to reporting FFO and providing information to unitholders so that AFFO could be easily determined. Chartwell has been considering changing its reporting measure for some time now and as a result of the GAAP requirement to record lease expenses on a Straight-line Basis, Chartwell has decided to move to reporting AFFO as it believes that it is the most meaningful and definitive measure of cash flow and financial performance for a public REIT. Chartwell believes that besides being appropriate for the REIT to report AFFO, it will put Chartwell at the leading edge of industry standards.

Chartwell is a growth-oriented investment trust owning and managing a complete spectrum of seniors housing communities. It is now the largest participant in the Canadian seniors housing business with a substantial and growing presence in the United States. Chartwell will capitalize on the strong demographic trends present in its markets to grow internally and through accretive acquisitions. Chartwell also has an exclusive option to purchase stabilized communities from Spectrum Seniors Housing Development LP, Canada's largest and fastest growing seniors housing development company.

Chartwell's Distribution Reinvestment Plan (DRIP) allows Unitholders to have their monthly cash distributions used to purchase Trust Units without incurring commission or brokerage fees, and receive bonus Units equal to 3% of their monthly cash distributions. More information can be obtained at www.chartwellreit.ca.

This press release contains forward-looking statements that reflect the current expectations of management of Chartwell and Chartwell Master Care LP ("Master LP") (Master LP together with its general partner and subsidiaries, the "Operator") about the future results, performance, achievements, prospects or opportunities for Chartwell, the Operator and the seniors housing industry. Chartwell has tried to identify these forward-looking statements relating to its general affairs as well as for statements concerning the completion of any proposed transaction, intended financing arrangement and the effects on Chartwell of such acquisitions and financings as a result thereof by using words such as "may", "will", "expect", "anticipate", "believe", "intend", "plan", "estimate", "potentially" and similar expressions. Such forward-looking statements necessarily involve known and unknown risks and uncertainties that may cause Chartwell or the Operator or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: business risks; real property ownership and lack of diversity; geographic concentration; continued growth; acquisition and development; competition; debt financing; mezzanine financing; environmental liabilities; US/Canadian exchange rate fluctuations; government regulations; operations in the United States; joint venture interests; liability and insurance; personnel costs; labour relations; conflicts of interest; management contracts; availability of cash flows; the redemption right of Unitholders; accounting guidelines; dilution; nature of Units; Unitholder liability; market for Units and Unit price; matters affecting trading prices of convertible debentures; credit risk and prior ranking indebtedness; absence of covenant protection; and tax, including changes to tax laws. There can be no assurance that the expectations of management of Chartwell will prove to be correct.

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